1. Chapter 3
Business Organization

2. 3 Types of Organizations
• Sole Proprietorship
• Partnership
• Corporation

4. Sole Proprietorship
• Businesses owned and run by a single
individual
• Easiest form of business to start
Examples: lemonade stand, lawn mowing

5. Sole Proprietorship
Advantages:
• You’re your own boss.
• easy to start,
• easy to manage,
• owner can keep all the profits without sharing with
other owners,
• doesn't have to pay separate business income
taxes, determine own hours,
• easy to get out of business.

6. Sole Proprietorship
Disadvantages:
• owner has UNLIMITED LIABILITY!!! (full
responsibility for all losses, debts, and failures),
• difficult to raise financial capital,
• size might make it inefficient,
• owner may have limited managerial experience or
financial funds
• difficult to get experienced employees,
• limited life span in the business.

7. Partnership
Businesses jointly owned and run by two or more
people
• General Partnership: all partners share
responsibilities
• Limited Partnership: at least one partner isn't
active in daily business activities
• Examples: law firms, physician's groups,
architectural firms

8. Partnership
Advantages:
• easy to start,
• easy to manage,
• lack of special taxes on partnership,
• easy to get financial capital (you have a partner),
• more efficient daily operations (ownerships can
share the work load),
• easier to attract talented workers

9. Partnership
Disadvantages
• In General Partnerships, each partner is fully
responsible for actions of other partners.
• In Limited Partnerships, a partner's responsibility for
debts depends on size of his/her investment in the firm.
• Limited life span in the business. Potential conflict
between partners.
lack of resources compared to corporation
shared decision-making and profits
unlimited liability

10. Corporations
• Form of business recognized by law as a separate
legal entity with all the rights of an individual
• Have to file for permission with federal or state
government to create
• Partially owned by stockholders (investors who
buys ownership certificates in the firm)
Examples: Ford, GM, ABC, NBC

11. Corporations
Advantages
• easy to raise financial capital (can sell stocks to
investors, can borrow money by issuing bonds
that it will repay with interest),
• limited liability for owners,
• directors can hire professional managers to run
the firm,
• unlimited life,
• easy to transfer ownership (stockholders can sell
their stocks)

12. Corporations
Disadvantages:
• double taxation of profits (corporation pays taxes
on its profits and stockholders pay taxes on
money made),
• difficult and expensive to get a corporation charter,
• owners/stock shareholders have little to no voice
in how business is run, (Even with majority stock)
• subject to more government regulation.

13. Typical
Corporation
Secretary
Dept.
Mgr
Vice President
Marketing
Supervisor
Vice President
Production
Dept.
Mgr
Vice President
R & D
Director
Of Personnel
Vice President
Personnel
CEO
(President)
Treasurer
Board of Directors
(Chairperson)
Stockholders

14. Corporations
20%
Partnerships
7%
Sole
Proprietorships
73%
Partnerships 6%
Sole Proprietorships 5%
Corporations
89%
Percentage of Firms Percentage of Sales
Corporations
60%
Percentage of
Employed
Sole Prop. & Part.
40%

16. Define:
In Chapter 3 Section 1 define the following terms:

17. Limited Liability Company
LLC – limited liability
Not a corporation – pass
through entity to person(s)
who own it – no double
taxation

18. Franchises
Franchiser
Franchisee

19. Non - Profit Organizations
Churches & Religious
organizations
Charitable Organizations - United
Way – American Red Cross

20. Non - Profit Organizations
Cooperatives
consumer/purchasing -
wholesale clubs
producer/marketing -
agriculture

21. Non - Profit Organizations
Cooperatives
 consumer/purchasing - wholesale clubs
 producer/marketing - agriculture
service - credit unions,
insurance, HMO, child care
(fastest growing)
industrial/esops – more
common in Europe

22. Coke fields
Iron ore deposits
Steel mills
Ships
purchased by
Carnegie
purchased by
Carnegie
purchased by
Carnegie
purchased by
Carnegie
Coke fields
Iron ore deposits
Steel mills
Ships
Railroads
purchased by
Carnegie
purchased by
Carnegie
purchased by
Carnegie
purchased by
Carnegie
purchased by
Carnegie
Coke fields
purchased by
Carnegie
Coke fields
Iron ore deposits
purchased by
Carnegie
purchased by
Carnegie
Coke fields
Iron ore deposits
Steel mills
purchased by
Carnegie
purchased by
Carnegie
purchased by
Carnegie

23. GM
General Motors
Assembly
Manufact-
uring
Refining
Mining
Transportation

24. GM
General Motors
FordChrysler

25.  Disadvantages of Bigness
• impersonal
• waste of resources/pollution
• development of monopolies
• insecurity of workers
•Conglomerates – next slide
•Cost/benefit analysis - ahead
Economy of Scale

26. Soft Drink
Gasoline
Clothing
Parent
Company
Bakery
Sporting
Goods
Fast Food
Conglomerate